wealthy-woman-poster.jpgStill think China’s an emerging market? Well it’s emerging pretty fast. In just 10 years, China will account for one quarter of world demand for luxury goods.

The People’s Republic is still officially a Communist country, but you wouldn’t believe it to visit the affluent shopping streets of Shanghai and Beijing.

Indeed, China already takes around 12% of world output of luxury goods, and it is set to double its share by 2016, according to market research firm Taylor Nelson Sofres (TNS), whose latest piece of research is reported in this article in the Retail Bulletin ($).

Despite China’s taste for luxury goods, TNS warns marketers of luxury brands not to expect quick and easy returns. It says an
extremely strong international presence is required before luxury brands can establish themselves in China. Firms entering China today will need the same kind of patience, sustained investment and strong distribution as more traditional markets demand.

Some experts argue the easy money has probably already been made in China’s luxury goods sector and there are doubts about how many rich consumers there are outside the obvious and now saturated locations of Shanghai and Beijing — see this Financial Times story on the problems facing luxury-goods retailers in second-city Hangzhou ($).

TNS recommends focussing on the relatively untapped market that lies with China’s growing army of middle-class consumers. Jim Sailor, MD of TNS China, says:

In China right now, the luxury brands are for the super rich – the people that see them when travelling to New York, London, Paris and Rome, then come back to China and buy them. But we have shown there is significant market potential among middle-class Chinese. Middle-class demand will boost the success of luxury goods in China, although brand owners may need to create ‘affordable luxury’ categories to address lower purchasing power.”

EngagingChina has written previously about the attractions of China’s middle-class consumer market here and here.

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